by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, Economy, Finance, Markets, News, Politics
Mumbai : Belying industry expectations, RBI maintained its hawkish stand on Wednesday refusing to cut rates in view of the rising inflationary pressure and concerns over “fiscal slippage”.
Holding its key interest rate unchanged at 6 per cent, the central bank, however, eased liquidity constraints while lowering growth projection which were pulled down by the troubled implementation of the Goods & Services Tax and loss of consumer and business confidence.
According to the Reserve Bank of India’s fourth bi-monthly monetary policy review of 2017-18, the repurchase rate, or the short-term lending rate for commercial banks on loans taken from it, has been maintained at 6 per cent.
Consequent to the decision to maintain the repo rate, the reverse repo rate remained at 5.75 per cent.
The decision was taken by the six-member MPC headed by RBI Governor Urjit R. Patel. Five members of the panel voted in favour of maintaining the key lending rate.
While the government was non-committal in its reaction, India Inc. expressed its disappointment over the RBI’s refusal to cut rates.
At its last policy review in August, the central bank had reduced its repo rate by 25 basis points (bps) to 6 per cent from 6.25 per cent.
“The MPC observed that CPI inflation has risen by around two percentage points since its last meeting… Such juxtaposition of risks to inflation needs to be carefully managed,” the fourth bi-monthly monetary policy statement said.
“Although the domestic food price outlook remains largely stable, generalised momentum is building in prices of items excluding food, especially emanating from crude oil. The possibility of fiscal slippages may add to this momentum in the future.”
However, to induce liquidity into the system, the RBI reduced the Statutory Liquidity Ratio (SLR) — a reserve requirement that commercial banks must maintain — by 50 basis points to 19.5 per cent from October 15.
On the other hand, RBI lowered the country’s growth projection for 2017-18, pegging the Gross Value Added (GVA) to 6.7 per cent from earlier estimate of 7.3 per cent.
Meanwhile, the equity markets, which had already discounted any further reduction in key lending rates, made gains due to healthy demand for banking stocks after announcement of SLR cut.
The key indices also rose on the back of positive global cues and value buying.
The wider Nifty50 of the National Stock Exchange (NSE) rose by 55.40 points, or 0.56 per cent, to 9,914.90 points.
The 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 31,522.17 points, closed at 31,671.71 points — up 174.33 points, or 0.55 per cent.
The S&P BSE banking index rose by 0.17 per cent to close at 27,126.98 points.
The Ministry of Finance said: “We have noted that this decision has been made by the MPC in light of the underlying analysis which implies: a downward revision of the real GVA growth forecast… a marginally upward revision of the CPI inflation forecast for the second half of the year meaning an average inflation for the year 2017-18 as a whole of less than 4 percent.”
On its part, India Inc. expressed its disappointment over the decision to maintain its key lending rates.
“Ficci is disappointed that the MPC has chosen to hold the repo rate and not reduce it… In the context of current industrial situation, we felt that there was a need for a further cut in the repo rate,” said Pankaj Patel, President of the Federation of Indian Chambers of Commerce and Industry (Ficci).
“Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers. While RBI in the policy statement cites inflationary pressures to remain a concern, Ficci feels that we need to give equal consideration to growth prospects.”
Gopal Jiwarajka, President, PHD Chamber of Commerce and Industry, said: “Although a repo rate cut was expected from RBI, a 50 basis points cut in SLR (statutory liquidity ratio) is welcome and is expected to enhance banking sector liquidity in the coming times.”
Assocham President Sandeep Jajodia said: “What is not so pleasant is the fact that the credit policy does not give any indication of a rate cut even in the short to medium term, so the ball for growth revival is now completely in the court of the government through fiscal measures.”
For Chanda Kochhar, Managing Director and Chief Executive Officer, ICICI Bank, the RBI’s announcement to keep the policy rate unchanged was along expected lines.
“The MPC has not viewed the recent growth slowdown as being structural in nature and is expecting it to be transient with growth prospects likely to improve over the medium term,” said Kochhar.
—IANS
by admin | May 25, 2021 | Economy, Markets, News
By Rohit Vaid,
Mumbai : The Reserve Bank of India’s monetary policy review, coupled with macro-economic data points and expectations of an economic stimulus package, are expected to set the course for Indian equity indices during the truncated week’s trade sessions.
According to observers, market movements will also be affected by geo-political developments, direction of foreign fund flows and crude oil prices.
“This week, markets will look forward to the decision by the MPC (monetary policy committee) and if the MPC, via its statements, offers any hints on policy rate cuts or growth and inflation targets,” said Devendra Nevgi, Chief Executive, Zyfin Advisors.
“Though the chances of a cut are very slim.”
The RBI will hold its fourth bi-monthly MPC meeting on October 3 and 4. In its last review, the central bank had reduced its repurchase rate, or the short-term lending rate for commercial banks, by 25 basis points (bps) to 6 per cent from 6.25 per cent.
Besides the monetary policy review, macro-economic data points like Index of Eight Core Industries (ECI) figures, monthly automobile sales numbers and the Purchasing Managers’ Index (PMI) for manufacturing and service sector will be keenly watched by investors.
“The tail winds enjoyed by domestic economy due to benign commodity prices and falling inflation has currently started to reverse,” Vinod Nair, Head of Research, Geojit Financial Services, told IANS.
“On the backdrop of lackluster domestic macros, likelihood of extension of GST disruption and continued impact on corporate earnings, the current domestic premium valuation will not sustain and we expect consolidation to continue in near term.”
Apart from macro-data, the direction of foreign fund flows will be the other major theme for the week, experts opined.
In terms of investments, provisional figures from the stock exchanges showed that FIIs continued with their selling spree and off-loaded stocks worth Rs 10,896.59 crore, during September 25-29.
Figures from the National Securities Depository (NSDL) revealed that foreign portfolio investors (FPIs) divested equities worth Rs 5,899.95 crore, or $897.14 million.
“The sentiment in the markets would be dominated by the domestic investors (DIIs) and how much will they buy to counter sale onslaught from the FPIs,” Nevgi cited.
Foreign investors had divested Rs 5,328 crore on September 28, 2017 — the highest in recent times — whereas the DIIs net bought stocks worth Rs 5,196 crore on the same day. On a weekly basis, the DIIs had bought scrip worth Rs 11,666.60 crore.
In addition to equity investments, any announcement on an economic relief package for exporters after the GST council meets on next Friday, October 6 will also influence the movement of key indices.
Currency-wise, the Indian rupee weakened by 49 paise to close at 65.29 to a US dollar from its previous week’s close of 64.80 to a greenback.
“As far as the rupee is concerned, this week, trend in domestic and global equity markets will play a key role. Apart from market trends, RBI monetary policy will be keenly watched,” Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.
On technical charts, Nifty remains in a “short-term downtrend” and is expected to further consolidate after breaching its current support level of 9,760 points.
“Technically, while the Nifty has pulled back in the last two sessions, the index remains in a shortterm downtrend,” elaborated Deepak Jasani, Head of Retail Research for HDFC Securities.
“Weakness could resume once again, if the supports of 9,760 points is broken. On the upside, the Nifty would need to cross the resistances of 9,854 points for the current pullback rally to continue.”
Last week, the key Indian equity indices — the BSE Sensex and the NSE Nifty — witnessed further correction due to persistent outflow of foreign funds on the back of geopolitical risks and subdued macroeconomic sentiments.
Consequently, the 30-scrip Sensitive Index (Sensex) of the BSE plunged by 638.72 points or two per cent to close at 31,283.72 points.
Similarly, the Nifty50 of the National Stock Exchange (NSE) receded by 175.8 points or 1.76 per cent to close the week’s trade at 9,788.60 points.
(Rohit Vaid can be contacted at rohit.v@ians.in)
—IANS
by admin | May 25, 2021 | Banking, Corporate, Corporate Governance, Finance, News
Mumbai : The Reserve Bank of India (RBI) is expected to keep its key interest rate unchanged in its next monetary policy review on Wednesday, in view of the consumer price index (CPI) inflation in August shooting up to 3.36 per cent, according to latest official data.
While core inflation in August rose to 4.6 per cent, high food and fuel prices pushed wholesale inflation at 3.24 per cent, to nearly double of that over the previous month.
The RBI’s monetary policy committee (MPC), which will deliberate over two days here from Tuesday to decide on the fourth policy review of the fiscal, has the mandate to target an annual retail inflation rate of 4 per cent, with a band of 2 per cent in either direction.
In the previous bi-monthly review in August, subdued inflation and demand had prompted the central bank to reduce its repurchase rate, or the short-term lending rate for commercial banks, by 25 basis points (bps) to 6 per cent from 6.25 per cent.
State-run State Bank of India (SBI), in a report titled “RBI caught in a bind: Expect status quo on October 4, 2017”, said the apex bank faced a difficult decision on cutting its lending rate.
“On the eve of the forthcoming monetary and credit policy, the central bank is stuck in a conundrum of low growth, mild inflation, saving financialisation and external uncertainties. This will make the job difficult for the RBI on October 4,” the SBI Ecowrap report said.
“The obvious question that arises is choosing between (a) the move towards the 4 per cent inflation target swiftly, or (b) staying in the inflation band,” said SBI Chief Economic Adviser Soumya Kanti Ghosh.
“In hindsight, if the central bank moves towards the 4 per cent target in January 2018 as was suggested earlier, there would be limited room for rate cut in forthcoming policies.”
The reduction in August came after four consecutive policy reviews in which the RBI had maintained status quo on its repo, or short-term lending rate, since the reduction by 25 bps to 6.25 per cent in October 2016.
Announcing the August review, the RBI said: “Noting, however, that the trajectory of inflation in the baseline projection is expected to rise from current lows, the MPC decided to keep the policy stance neutral and to watch incoming data. The MPC remains focused on its commitment to keeping headline inflation close to four per cent on a durable basis.”
Domestic credit rating agency ICRA also discounted the possibility of an RBI rate cut.
“We do not expect a rate cut in the upcoming policy review as consumer price index (CPI) inflation is expected to chart an upward trajectory over the coming months, and print between 4.5 per cent and 5 per cent in March 2018,” ICRA MD Naresh Takkar said in a report earlier this week.
Instead, the drop in GDP growth during the first quarter, has provoked strident Arate cut calls from industry, which wants urgent steps to revive private investments.
Pulled down by sluggish manufacturing, growth in the Indian economy, during April to June, fell to 5.7 per cent, clocking the lowest GDP growth rate under the Narendra Modi dispensation.
According to the American financial services firm Morgan Stanley, the RBI is expected to hold rates while maintaining its neutral policy stance.
“We expect the RBI to stay on hold at the upcoming meeting as rising incoming inflation and projections of further acceleration in inflation ahead will mean that there would be limited space for further easing,” Morgan Stanley said in a research note.
The SBI report also pointed to external challenges like rising geopolitical tensions, and the hardening of commodity and crude oil prices. In mid-September, petrol rates here, for instance, Atouched their highest level since Modi assumed office three years ago.
“In particular, the external environment looks a little bit wobbly compared to what it was at the beginning of 2017,” it said.
“No wonder, the rupee is currently witnessing depreciation pressures,” the report added.
The rupee has recently come under pressure owing to volatile capital flows and the country’s widening current account deficit.
—IANS
by admin | May 25, 2021 | Economy, Markets, News
Mumbai : Key Indian equity indices closed on a flat-to-positive note as investors booked profits ahead of the release of important macro-economic data later on Friday.
Market observers opined that the caution ahead of the RBI’s monetary policy review and a long weekend also forced investors to vacate some of their positions.
The wider 51-scrip Nifty of the National Stock Exchange (NSE) closed at 9,788.60 points — up 19.65 points or 0.20 per cent.
The 30-scrip Sensitive Index of the BSE, which opened at 31,367.25 points, closed at 31,283.72 points — up a mere 1.24 points, from its previous close at 31,282.48 points.
The Sensex touched a high of 31,523.87 points and a low of 31,243.71 points during intra-day trade.
“The pullback rally continued today with the markets ending with modest gains on Friday (Nifty closed up 0.2 per cent). A sell off in the afternoon session curbed the gains ahead of the long weekend,” Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS.
“Firm global cues and positive sentiments after the government stuck to its budgeted market borrowing for the second half of fiscal 2018, thereby easing concerns that it would widen its fiscal deficit target, helped to lift the indices.”
Anand James, Chief Market Strategist, Geojit Financial Services, said: “With a long weekend ahead, followed by RBI rate decision and a series of macro data, traders opted to limit aggressive bets, confining indices to a flat close.”
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the benchmark indices pared gains to end on a flat note on the back of foreign fund outflows.
In terms of investments, provisional data with the exchanges showed that foreign institutional investors (FIIs) sold scrips worth Rs 1,546.86 crore while domestic institutional investors (DIIs) purchased stocks worth Rs 2,064.63 crore.
On the currency front, the rupee strengthened by 22 paise to close at 65.29 against the US dollar from its previous close at 65.51.
Major Sensex gainers on Friday were: Bajaj Auto, up 2.44 per cent at Rs 3,108.15; Bharti Airtel, up 1.63 per cent at Rs 388.65; Mahindra and Mahindra, up 1.55 per cent at Rs 1,253.75; Coal India, up 1.35 per cent at Rs 270.60; and Adani Ports, up 1.25 per cent at Rs 376.20.
Major Sensex losers were: Hindustan Unilever, down 2.37 per cent at Rs 1,175.15; Wipro, down 1.71 per cent at Rs 280.95; Tata Consultancy Services (TCS), down 1.67 per cent at Rs 2,437; Dr Reddy’s Lab, down 1.62 per cent at Rs 2,329.40; and ITC, down 1.11 per cent at Rs 258.25.
—IANS
by admin | May 25, 2021 | Banking, Business Summit, Commodities, Commodities News, Commodity Market, Economy, Events, Finance, Investing, Markets, News, Politics
Former RBI Governor C. Rangarajan
New Delhi : Former Reserve Bank of India Governor C. Rangarajan on Friday said the package the government is looking at to revive the economy should be partly to raise capital expenditure and look at problems preventing private investments from rising.
“The package in my opinion should be partly to raise capital expenditure of the government, but suited in a way in which it will stimulate private investments,” he told reporters on the sidelines of the 10th International Gold Summit by Assocham.
He said the fall in growth rate was also accompanied by a fall in investment rate.
“More critically, it is the private investment rate that has fallen. In fact public expenditure on capital has shown some slight rise. Therefore, the most important thing is to address the problems that may be preventing private investment from rising,” Rangarajan said.
He suggested that two things can be done. “There are a number of stalled projects. The low hanging fruit is to ensure that these stalled projects are activated. Secondly, the banking system needs to be recapitalised so that it can provide additional credit for investment as well.”
—IANS
